The Hong Kong Monetary Authority chief executive defended Hong Kong’s currency rate, saying it has helped the city weather some of its toughest economic challenges.
In an interview with CNBC on Tuesday, Eddie Yue, the head of Hong Kong’s de facto central bank, said it is important to maintain a stable exchange rate through interest rate adjustments. paramount to Hong Kong.
“The currency peg” is actually doing a great job in Hong Kong in providing the much-needed exchange rate stability, especially across cycles and in times of uncertainty, Mr. Yue said.
“Hong Kong is a very small open economy with an outward-facing nature. So having a stable exchange rate is very important to us. But of course it is. [with] With any monetary policy, there will be trade-offs. ”
The Hong Kong dollar has been pegged to the US dollar since 1983, and trade in a narrow range between 7.75 and 7.85 Hong Kong dollars against the greenback. HKMA intervenes when Hong Kong Dollar wandering outside the accepted range.
Hong Kong Economy
The government will depend on stimulating economic growth while the HKMA focuses its monetary policies on stabilizing the Hong Kong dollar against the greenback.
“And the trade-off for Hong Kong is that we won’t use interest rates to adjust economic growth, and that will depend largely on other government policies, including the government’s policy,” he added. fiscal books”.
Maintaining a stable exchange rate through interest rate adjustments continues to be paramount for Hong Kong, the chief of Hong Kong’s central bank said.
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The US Federal Reserve’s aggressive interest rate hikes this year forced the dollar to rise against Hong Kong’s local currency, prompting capital outflows from Hong Kong.
HKMA has raised interest rates five times this year and earlier this year, bought Hong Kong dollars to stabilize the currency.
Although interest rates riseYue said the economy is on track as the government implements ways to boost demand through consumer vouchers and financial support for small and medium-sized businesses.
The eventual reopening of Hong Kong will attract tourists and more spending, Yue said, but he warned this will come at a time when there will be fresh winds from the weakening global economy.
Impact on the housing market
Yue said he believes the rate hike will not affect borrowers, especially those with mortgages. The default rate is also as low as 0.05% and the average loan-to-deposit ratio is just 50%, he said.
“So even if there is [sic] is any correction in property prices, or if there should be an increase in interest rates… I think the impact on mortgages will be pretty manageable,” he said.
Covid-19 pandemic, The departure of talent and now higher interest rates are putting downward pressure on house prices.
Investment bank Goldman Sachs earlier this month said house prices in Hong Kong would fall another 30% from last year’s levels, as interest rates continue to rise.
